While the average Social Security benefit now sits at an all-time high of $2,071 per month, living off your benefits alone is still challenging. Even if you have a relatively modest lifestyle, you could still find yourself pinching pennies to make it through the month. Seniors in some states also forfeit a chunk of their benefits to state taxes.
Fortunately, these taxes are falling out of favor. Many of those living in the eight states that still have them won't lose any of their Social Security checks to their state governments. But there could still be a surprise waiting at tax time.
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The eight states that tax Social Security benefits in 2026
While many states used to have Social Security benefit taxes, they've become increasingly unpopular. Several states have responded by phasing them out. Only the following eight still have benefit taxes on the books in 2026:
- Colorado
- Connecticut
- Minnesota
- Montana
- New Mexico
- Rhode Island
- Utah
- Vermont
West Virginia was also on this list up until last year. It began slowly phasing out its benefit tax in 2022. Those with adjusted gross incomes (AGIs) of $50,000 or less for single filers and $100,000 or less for married filers haven't owed state taxes on their Social Security benefits since then.
Those with higher AGIs may owe state taxes on up to 35% of their Social Security benefits when filing their 2025 return. Beginning in 2026, no one in the state will owe any benefit taxes.
If you live in one of the other states listed, it's possible you may not owe benefit taxes either. Many states have exemptions for low-to-middle-income seniors. Check with an accountant or your state's department of taxation to learn its rules.
Federal Social Security benefit taxes remain in force
Seniors in all states could owe federal Social Security benefit taxes on up to 85% of their checks. How much you'll owe depends on your provisional income. This is your AGI, plus any nontaxable interest, which you might have if you own municipal bonds, and half your annual Social Security benefit. For example, if your AGI is $40,000 and you get $20,000 in Social Security benefits, your provisional income would be $50,000.
The table breaks down what percentage of your Social Security benefits you'll owe ordinary income taxes on, based on your provisional income and marital status:
|
Marital Status |
0% of Benefits Taxable If Provisional Income Is Under: |
Up to 50% of Benefits Taxable If Provisional Income Is Between: |
Up to 85% of Benefits Taxable If Provisional Income Is Over: |
|---|---|---|---|
|
Single |
$25,000 |
$25,000 and $34,000 |
$34,000 |
|
Married |
$32,000 |
$32,000 and $44,000 |
$44,000 |
Data ource: Social Security Administration.
These numbers aren't indexed for inflation, meaning they don't change annually. As living costs rise, it's becoming increasingly difficult for seniors to avoid the taxable range. This could cost them thousands of dollars each year.
What to do about federal Social Security benefit taxes
Avoiding benefits might be possible, but it's not easy to do. You'll have to keep your AGI to a minimum, which means limiting how much money you withdraw from tax-deferred retirement accounts like traditional 401(k)s and IRAs. These distributions count toward your AGI. Roth distributions don't, so you may be able to stay below the taxation threshold by withdrawing more money from your Roth accounts if you have them.
When that's not possible, you'll have to prepare for Social Security benefit taxes. You can do this by saving for the taxes on your own, or by requesting the Social Security Administration withhold money for taxes from your checks.
In either case, you may want to consult with an accountant who can give you an idea of how much you'll owe in benefit taxes. They may also be able to advise you on other strategies you could take to reduce your provisional income.
